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severe consequences not just for the UK, but
also for the world.
“It’s unclear whether the network effect that
made London the financial hub it is today is
still as powerful. Perhaps with new technolo-
gies it will be easier for the financial sector to
operate in a more decentralised way.
“A decentralised model will likely be nega-
tive for the sector. With aggregation you see
greater efficiency and more innovations while
reducing costs for the industry as a whole.
Decentralisation would certainly lead to a loss
for everyone,” Claeys says.
What about London?
Regardless of these possible scenarios, what
happens to London?
Bankers in Britain appear to be pretty bullish
when it comes to the issue. A report authored
by TABB Group and Synechron late last year
found the majority agree London will remain
the financial centre of Europe, at least for the
next five years. The poll of 80 financial ser-
vices individuals working in capital markets
found 72% of respondents in the UK remain
positive on London’s financial position in Eu-
rope, although 78% agree Brexit will have an
overall negative impact on the UK’s financial
markets.
It’s hard to say at this point where London
will stand once the divorce from the European
Union is finalised. Negotiations are ongoing
and have only just recently begun. Further-
more there are multiple outcomes of the ne-
gotiations, some of which could see the UK’s
access the single market severely limited.
“Our analysis suggests that the impact on the
financial services sector will vary dramatically
with how much access to the EU is retained.
In a high access scenario the disruption could
be negligible. In a low access scenario the
impact is likely to be much larger, and any
resulting wider impact to the ecosystem could
magnify losses,” Austen says.
Oliver Wyman research aimed at assessing
R E V I E W
|
B R E X I T ]
the impact of Brexit on London
suggests should the UK successful-
ly negotiate passporting, equiva-
lence rights and access to the Sin-
“The primary focus must be
to avoid a post-Brexit ‘cliff
edge’ and this will require
banks, policymakers, and
regulators to all play a role.”
MATT AUSTEN, UK FINANCIAL
SERVICES HEAD, OLIVER WYMAN
gle Market, UK-based activity may
be only slightly subdued. Revenues
from EU-related activity would
decline by approximately £2 billion
with around 3-4,000 jobs at risk.
However, should the UK fall into
a third-country status with the EU
and lose equivalence the conse-
quences are tipped to be far more
severe. Revenues from EU-related
activity in London would plummet
by up to £20 billion and around
35,000 jobs would be at risk.
“With the European market set
to become more fragmented and
less profitable, banks will have dif-
ficult strategic trade-offs to make.
Nonetheless, the primary focus
must be to avoid a post-Brexit ‘cliff
edge’ and this will require banks,
policymakers, and regulators to all
play a role,” Austen adds.
At the moment, the true impact of
Brexit remains speculation but we
can agree there’s one thing that is
certain, the financial sector and the
city of London may never be the
same again.
Issue 53
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